- GBP/USD struggles to keep recovery moves from 1.3087.
- Another rough patch on Brexit talks, Reuters’ poll suggesting two more years to reach pre-pandemic UK economy size weigh on the cable.
- US dollar trims the previous day’s gains, market sentiment dwindles amid mixed catalysts.
- Second-tier data from the US, Brexit talks remain will be the spotlight.
GBP/USD gradually overcomes the intraday low of 1.3087 while rising to 1.3108 before the London open on Thursday. Even so, the Cable stays hesitant to cheer the US dollar’s pullback as Brexit negotiations again stalled while economists surveyed by Reuters expect two more years to reach the pre-coronavirus (COVID-19) level of the economy. Traders may now wait for further talks between the European Union (EU) and the UK, as well as US Jobless Claims and Philadelphia Fed Manufacturing Survey, for fresh impetus.
Even before reaching the tough issues like fisheries and level playing, the seventh round Brexit talks seem to have dropped optimism. The reason could be traced from the latest disagreements over the UK truckers’ access to Europe. The UK Telegraph said, “David Frost will tell Brussels that refusal to allow wide-ranging access for British lorries is likely to harm the EU more than the UK.”
Elsewhere, Reuters poll suggests, “Britain’s economy will not fully recover from its current historic downturn for at least two years.” However, “there is only a slim chance the Bank of England will use negative interest rates to boost the upswing,” as per the update.
On the other hand, the US dollar started trimming Wednesday’s gains from 27-month low as the US-Iran issue signals further worsening of Sino-American tussle and weigh on the market’s risk-tone sentiment. Also disappointing the traders were the latest increase in European virus numbers as well as surprise halt to Australia’s declining pandemic numbers.
It’s worth mentioning that the US dollar index (DXY) drops 0.10% to 92.95 by the press time after rising around 0.80% the previous day.
Traders may now keep eyes on the on-going Brexit talks as well as the virus headlines for fresh impetus ahead of the US weekly Initial Jobless Claims, expected 925K versus 963K prior. Additionally, the Philadelphia Fed Manufacturing Survey for August, forecast 21 against 24.1 previous readouts, can also entertain the market players.
Technical analysis
The recent recovery of GBP/USD takes clues from 10-day SMA following the previous day’s pullback from the yearly high. While RSI recedes from overbought conditions and suggests no major challenges to the latest pullback, the pair’s sustained trading below an ascending trend line from July 22 keeps the bears hopeful. Further strengthening the case for the quote’s downside is the bumpy road beyond 1.3200. As a result, sellers await a clear break below the 10-day SMA level of 1.3093 to attack 1.3040 mark comprising 21-day SMA. However, an upward sloping support line from June 30, at 1.2940 now, may challenge the additional south run.
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